Engineering services, with a huge potential to offshore, has now received the attention of the most important supplier market in the offshoring space, India. Nasscom and management-consulting firm, Booz Allen Hamilton, have carried out a research that projects a huge market opportunity for India in the engineering-services.
According to the research, of the $750 billion global engineering-services market today, only about $10–$15 billion is offshored. India accounts for about 12% of the total offshore market, that is somewhere between $1.2 billion–$1.8 billion. This, the report says, could go up to $40 billion by 2020.
This implies an increase in India’s share to approximately 20%–25% of the total offshored market, which is likely to grow to $150–$250 billion by that time.
Offshore engineering services is one area where India does not have a dominant market share, unlike most other offshore services segments and subsegments.
The study examined engineering services across five sectors — automotive, aerospace, high-tech/telecom, utilities and construction/industrial.
High-tech leads the engineering services offshoring market in India today. In 2004 it accounted for 30% of total market, followed by the automotive sector at 19%. “Though cost is the basic value proposition today, with time, time-to-market, quality of supply and government incentives will become the value propositions,” said Kevin Dehoff, VP, Booz Allen Hamilton, speaking at a conference organized to mark the release of the report.
It is Not So New, After All
Though engineering services, for some reason, has not got the limelight and media space like research and analytics or a much smaller legal services offshoring segment, some discreet engineering-services activities have been offshored to India.
In the automotive sector, GM, Ford, DaimlerChrysler and Delphi have offshore captive centers in India. In the engineering/construction segment, firms such as Bechtel, Butler, Flour Daniel and Lurgi do a lot of their engineering services work out of India, including acting as the people resource center for the Asian region.
Among the third-party service providers, large IT-services companies are the most successful in this area. TCS, which employs more than 1000 people in this area, counts Boeing, Delphi and Ford among its clients. Infosys has worked for client such as Airbus, Boeing and Siemens Energy and Automation. HCL, counts among its clients companies such as Delphi and Boeing. Wipro and Satyam have also done work in this area. Wipro is fairly strong in telecom.
The opportunity has also prompted a breed of pure play engineering-services companies to target this space. Among them are Infotech Enterprises, Quest Global, Axis, Hero Global Design, Geometric Software, Plexion, Rolta, Quantech Global and Mahindra Engineering Services. Most of these companies target automotive/aerospace engineering space. Neilsoft is a company that focuses on manufacturing and construction-engineering services.
